Domtar Reports 4Q loss of 26M

Monday, February 18, 2008

Press release from the issuing company

Montreal, February 15, 2008 – Domtar Corporation today reported a net loss of $26 million ($0.05 per diluted share) for the fourth quarter of 2007 compared to net income of $36 million ($0.07 per diluted share) for the third quarter of 2007. Sales for the fourth quarter amounted to $1.7 billion, unchanged from the third quarter 2007. Excluding the items listed below, the Company earned $29 million ($0.06 per diluted share) in the fourth quarter of 2007 compared to $44 million ($0.09 per diluted share) in the third quarter of 2007. The stronger Canadian dollar reduced earnings by approximately $0.02 per diluted share in the fourth quarter when compared to the third quarter 2007.

Fourth quarter 2007:

- Charge of $96 million ($66 million after tax) related to the impairment of goodwill and property, plant and equipment;
- Gains of $51 million ($35 million after tax) for lawsuit and insurance claim settlements;
- Expenses of $25 million ($17 million after tax) related to the debt restructuring;
- Costs of $21 million ($14 million after tax) related to synergies, integration and optimization;
- Gain of $11 million related to a change in statutory income tax rates;
- Closure and restructuring costs of $7 million ($5 million after tax); and
- Gains of $2 million ($1 million after tax) related to financial instruments.

Third quarter 2007:

- Costs of $14 million ($8 million after tax) related to synergies, integration and optimization;
- Gains of $6 million ($4 million after tax) related to financial instruments;
- Charge of $3 million related to a change in statutory income tax rates; and
- Closure and restructuring costs of $2 million ($1 million after tax).

Commenting on the financial results, Mr. Raymond Royer, President and CEO said, "In the fourth quarter, our results were impacted by the unprecedented run-up in the value of the Canadian dollar against the U.S. dollar and by continued pressure on fiber, chemical and energy related costs. Nonetheless, we benefited from a better supply-demand balance in our system with reduced lack-of-order downtime, paper production in sync with our shipments and pricing momentum despite the seasonally slower period of the year."